Green Mountain Coffee Goes to School

If you're struggling to figure out what to get your college student for Christmas, Green Mountain Coffee Roasters (NASDAQ: GMCR  ) has an idea. Weary holiday consumers, meet Green Mountain's college-branded Keurig K10 MINI Plus brewers.

Green Mountain Coffee Roasters, Inc., Starbucks

Image source: Green Mountain Coffee Roasters, 

Just like they sound, the $99 MINI Plus brewers offer the company's slimmest physical profile, ideal for those looking for a quick single-serve brewer to occupy minimal space -- say, for instance, folks living in a dorm room, apartment, or maybe a tailgating van... down by the river.

Already own a Keurig MINI Plus? No problem; you can also just buy the decals from Green Mountain and adorn it yourself.

But don't get too excited just yet; they're only available for 10 NCAA Division 1 schools at the moment, including the Universities of Arizona, Arkansas, Florida, Georgia, Miami, Mississippi, Nebraska, and Texas; Rutgers University, and Washington State. Even so, those 10 schools collectively account for more than 300,000 enrolled students, as well as millions upon millions of fans and alumni.

And if your favorite school isn't available just yet, Green Mountain's website insists you "stay calm and keep checking back -- we're launching new schools all the time."

Here's what it means for you
Now, that's all well and good... but what does it mean for investors?

Remember, despite turning in blowout quarterly results a few weeks ago, Green Mountain issued surprisingly weak guidance for the current quarter -- its fiscal first quarter 2014, mind you -- calling for overall sales growth in the low-to-mid single digits thanks to "difficult brewer and portion pack sales comparisons," the negative impact of unlicensed K-Cup packs, and currency exchange effects in Canada.

Meanwhile, retail coffee powerhouse Starbucks (NASDAQ: SBUX  )  last quarter not only managed to grow its own quarterly revenue by 13% on solid 7% global comparable-store sales growth, but is also targeting 10% or greater revenue growth next year on solid expected comps, and more than 1,500 new planned physical locations. Needless to say, investors are rightly worried of the broader implications if Green Mountain can no longer keep up with the significantly larger Starbucks' top-line growth.

That said, Green Mountain did state that its quarterly adjusted earnings should grow more quickly, or in the 12% to 18% range over last year, and stronger high-single-digit revenue growth should resume during the second half of fiscal 2014 as some of those unlicensed packs are transitioned to licensed partners.

But in the near term, you can bet that Green Mountain is keen to grab all the system sales it can muster in its efforts to exceed expectations during the all-important holiday season. If that means pulling in tens of thousands of Division 1 college fans by offering branded decals on their single-serve brewers, then so be it.

Given Green Mountain's currently sluggish growth, however, I'm not particularly intrigued with shares currently trading around 23 times last year's earnings, and almost 17 times next year's estimates. But it's also worth noting Green Mountain did declare a quarterly dividend of $0.25 per share last month while simultaneously approving up to $1 billion in share repurchases over the next two years, so the stock could very well turn out to be a good deal for patient long-term investors.

Personally, though, I'm fine with simply keeping Green Mountain on my watchlist for the time being. If I'm afforded a more attractive entry point down the road, I'll be happy to take advantage of it.

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